Finance: Sustainability or performance?
Published: 1 March 2022
23 March. Professor Nickolay Gantchev, University of Warwick
Professor Nickolay Gantchev, University of Warwick
'Sustainability or Performance? Ratings and Fund Managers’ Incentives'
Wednesday 23 March, 1pm - 2.15pm
Zoom online seminar
Abstract
We explore how mutual funds react when the tradeoff between sustainability and performance becomes salient. Following the introduction of Morningstar’s sustainability ratings (the 'globe' ratings), mutual funds increased their holdings of sustainable stocks in order to improve their globe ratings. This trading behaviour created buying pressure, decreasing the returns of stocks with high sustainability ratings. Consequently, a tradeoff between sustainability and performance emerged. Since performance appears to be more important in attracting flows than sustainability, in the new equilibrium, funds do not trade to improve their globe ratings and the globe ratings do not affect investor flows.
Biography
Nickolay Gantchev is a Professor of Finance at Warwick Business School, a Research Fellow at the Centre for Economic Policy Research (CEPR), and a Research Member at the European Corporate Governance Institute (ECGI). He holds a PhD in Finance from the Wharton School at the University of Pennsylvania and an MBA/MS in Finance from the Carroll School of Management at Boston College. Prior to joining WBS in July 2020, Professor Gantchev served on the faculty of the University of North Carolina at Chapel Hill and Southern Methodist University.
Further information: business-events@glasgow.ac.uk
First published: 1 March 2022
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